Boyuan Construction's Second Quarter Highlighted by 136.5% Increase in Gross Profit, Driving Net Income of $4.4 Million

TORONTO, Feb. 14, 2019 /CNW/ - Boyuan Construction Group, Inc. ("Boyuan" or the "Company") (TSX: BOY), an established China-based construction and engineering company, today reported strong second quarter financial results for the three month period ended December 31, 2018. All figures are in U.S. dollars unless otherwise stated.

Second Quarter 2019 Highlights

• Revenue grew 46.2% to $97.2 million;
• Gross profit increased 136.5% to $8.2 million;
• Earnings significantly improved, with net income increasing to $4.4 million; from $256 thousand in the same period of last year
• Commenced construction in the quarter on three additional material projects with an aggregate contract value of $54.9 million.

"Strong revenue growth and a smaller discount amount applied to non-current unbilled revenue and accounts resulted in a 136.5% increase in our gross profit, and ultimately contributed to our net income of $4.4 million for the quarter," said Mr. Cai Liang Shou, Chairman and CEO of Boyuan Construction Group. "We remain very well-positioned in our core market of Jiaxing and its surrounding area and have benefited from our continued execution on new residential and commercial contracts in select smaller centres. During the quarter, we announced that we had commenced construction on three material new projects with an aggregate contract value of $54.9 million. These projects included a 104,967 square meter residential development in Yancheng City in Jiangsu Province; a 70,404 square meter residential development in Pinghu City in Zhejiang Province; and a 62,886 square meter residential development in Tongxiang City. "

Selected Second Quarter Financial Results

In thousands except share and % data	Q2 2019	Q2 2018	Change
Revenue	$97,199	$66,538	46.1%
Gross profit	$8,227	$3,478	136.5%
Gross profit margin	8.5%	5.2%	63.5%
EBITDA^1	$7,028	$3,015	133.1%
Net income	$4,392	$256	1,615.6%
Earnings per share – diluted	$0.17	$0.01	1,600.0%

In thousands except % data	Dec. 31, 2018	June 30, 2018	Change
Total Assets	$279,910	$272,617	2.7%
Cash, cash equivalents & restricted cash	$15,898	$15,783	0.7%

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^1	EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is not a defined performance measure under IFRS.

Review of Second Quarter 2019 Financial Results

Revenue for the second quarter increased 46.1% to $97.2 million compared to $66.5 million for the same period last year. The company attributes this growth to its continued focus on robust real estate markets in smaller centres, including Jiaxing, Zhejiang province and surrounding area. 

Cost of construction for Q2 FY2019 was $89.0 million, an increase of 41.1% from $63.1 million for Q2 FY2018. The two major components of the cost of construction are direct material and labour costs. Direct material costs were $62.2 million and labour costs were $22.2 million in this quarter, compared to $43.0 million and $16.6 million respectively in the same quarter last year.

Gross profit for the quarter was $8.2 million, or 8.5% of revenue. Gross profit for the same period last year was $3.5 million, or 5.2% of revenue. The higher gross margin for this period was due to the smaller discount amount applied to the non-current unbilled revenue and accounts receivable compared to the same period last year.

Other income was $1.1 million for the quarter, compared to $1.2 million in the same period last year. Accretion income from the discount on non-current accounts receivable and unbilled revenue of $1.1 million and $1.2 million was recorded for the periods ended December 31, 2018 and 2017 respectively.

G&A expenses were $1.4 million in the quarter, in line with the same period in the prior year. The Company had a net impairment loss of $1.2 million for the quarter. The impairment loss recognized in the quarter was driven by long outstanding account receivable from a project in Hainan.  For the same periods last year, net impairment loss recognized were $0.6 million.

Interest expense for the quarter was $1.0 million compared to $1.8 million a year ago. The decrease in interest expense was mainly due to the decrease in the bank notes payable amount and the decrease in convertible debentures amount.

The after-tax net income for the quarter was $4.4 million, or $0.17 per diluted share, compared to $0.3 million, or $0.01 per diluted share for the same period the prior year.

Boyuan had working capital of $49 million, including cash, cash equivalents, and restricted cash totaling $15.9 million as at December 31, 2018. This compares to $53.3 million and $15.8 million, respectively at June 30, 2018.

Boyuan's consolidated statements for the three-month period and six-month period ended December 31, 2018 and related management's discussion and analysis (MD&A) will be filed with securities regulatory authorities within applicable timelines and will be available via SEDAR at www.sedar.com.

Conference Call Notice

A conference call for analysts and investors will be held on Friday, February 15, 2019 at 9 a.m. ET, to discuss the quarterly results. All interested parties can join the conference call by dialing 1-888-231-8191 or 647-427-7450. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until February 22, 2019 at 11:59 PM (ET). To access the archived conference call, dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 6455814.

About Boyuan Construction Group, Inc.

Backed by a longstanding track record, Boyuan Construction Group, Inc. ("Boyuan" or the "Company") has the knowledge and expertise to design and build a wide range of commercial and residential developments, as well as municipal infrastructure and engineering projects. Based in Jiaxing City and with a growing presence in both Zhejiang Province and Hainan Province, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta and the Hainan Province. The Company's current project backlog includes residential, commercial, industrial and mixed-use developments. For more information visit www.boyuangroup.com.

Caution Regarding Forward-Looking Information:

Certain information contained in this press release constitutes forward-looking information, which is information relating to future events or the Company's future performance and which is inherently uncertain. All information other than statements of historical fact may be forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words or phrases (including negative variations) suggesting future outcomes or statements regarding an outlook. Forward-looking information contained in this press release includes, but is not limited to, management's expectation to comply with the Alternative Information Guidelines. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. The Company believes the expectations reflected in the forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and readers are cautioned not to place undue reliance on forward-looking information contained in this press release. Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking information contained in this press release include, but are not limited to: risk of a general cease trade order bing issued, risk of risk of macro-economy cycle, risk from competition, risk from insufficient marketing to secure new projects, risk in obtaining additional financing, risk involving permits and licences, reliance on key management member, risk from supply of raw materials, risk of financial leverage, risk of bad debts in accounts receivables, risk involved in real estate development, foreign exchange fluctuations, political and economic conditions in China and other risks included in the Company's AIF for the fiscal year ended June 30, 2018 and in the Company's public disclosure documents filed with certain Canadian securities regulatory authorities and available at www.sedar.com. The forward-looking information contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as otherwise required by law.

SOURCE Boyuan Construction Group, Inc.

For further information: Boyuan Construction Group, Inc., Mr. Paul Law, CFO, +(852) 9329 5088, [email protected]; NATIONAL Capital Markets, Trevor Heisler, Investor Relations, [phone], [email protected]